Maryland Research and Development Tax Credit
Maryland Department of Commerce
10% incremental QRE (capped)
Application-required R&D credit — capped pool, November 15 deadline
Maryland's Research and Development Tax Credit offers 10% of Maryland-located qualified research expenses (QREs) above a Maryland Base Amount against the Maryland income tax, subject to an annual $12 million statewide cap. Unlike pure entitlement credits, applicants must file an annual application with the Maryland Department of Commerce by November 15 of the year following the tax year. If aggregate approved credits exceed the cap, each applicant's credit is prorated. The $12M cap is split: $8.5M allocated to general businesses and $3.5M reserved for small businesses (net book value of assets < $5M). Small businesses receive a partially refundable credit — up to 50% of any credit exceeding their Maryland income tax liability may be paid as a cash refund. Non-small-business credits are non-refundable with a 7-year carryforward.
- Funding type
- Tax Credit
- Level
- State
- Amount range
- $250,000
- Realistic amount
- A Maryland company with $500K in Maryland incremental QRE (above base) is eligible for a $50,000 credit, but actual payo…
- Deadline
- Annual — November 15 of the year following the tax year (e.g., November 15, 2025 for tax year 2024)
- Status
- active
- States
- MD
- Payment model
- tax offset
Who qualifies
- Any entity subject to Maryland income tax that conducts qualified research with Maryland-located expenses
- Includes C-corps, S-corps, LLCs, partnerships, and sole proprietors filing Maryland income taxes
- Qualified research expenses must meet the federal IRC §41 definition (technological in nature, process of experimentation, qualified purpose)
- Maryland QRE must be for research conducted within Maryland — out-of-state activity is excluded
- Small business designation (for the $3.5M set-aside pool and refundability): entity must have total net book value of assets under $5 million at the close of the taxable year
- Must file an application with Maryland Department of Commerce by November 15 — self-assessment alone is not sufficient
- Maximum credit per applicant is $250,000 (both pools combined)
What it covers
Eligible expenses
- Wages paid to Maryland employees for time spent conducting qualified research activities
- 65% of amounts paid to contractors for qualified research services conducted in Maryland
- Supplies consumed in the conduct of qualified research physically performed in Maryland
- Rental or lease costs of computers and equipment directly used in Maryland qualified research
Ineligible expenses
- Research conducted outside Maryland — only Maryland-sited activities qualify
- Research funded by federal or state government grants or customer contracts — funded research disqualifies QRE
- Research in social sciences, arts, humanities, or management sciences
- Routine quality control testing, debugging, or adaptation that does not satisfy the §41 four-part test
- Research after commercial production of a product has begun (adapting existing systems for individual customers)
How to apply
-
1
Document Maryland-located QRE during the tax year
Track all qualified research expenses for activities physically conducted in Maryland: employee wages for Maryland-based qualifying research employees, supply costs consumed in Maryland R&D activities, and 65% of amounts paid to Maryland contractors for qualifying research. Maintain contemporaneous records including employee timesheets, project descriptions documenting technological uncertainty and process of experimentation, and vendor invoices.
~4 hrs
-
2
Compute the Maryland Base Amount and incremental QRE
Calculate the Maryland Base Amount using the IRC §41 methodology: fixed-base percentage × average annual gross receipts for the prior 4 tax years (minimum base of 50% of current-year Maryland QRE). Incremental Maryland QRE = current-year Maryland QRE minus the Maryland Base Amount. Apply 10% to arrive at the credit amount before cap and proration. Maximum eligible credit is $250,000 per applicant.
~4 hrs
-
3
Submit application to Maryland Department of Commerce by November 15
File the Maryland R&D Tax Credit application through Maryland Commerce's online application portal by November 15 of the year following the tax year (e.g., November 15, 2025 for tax year 2024). The application requires: entity identification, Maryland QRE detail by project category, Base Amount calculation, credit amount requested, and certification of eligibility. Small businesses should indicate their asset value to qualify for the small business pool.
~4 hrs
-
4
Receive tax credit certificate by February 15
Maryland Commerce reviews applications, determines total approved credits, and applies proration if aggregate approved credits exceed the $12M cap. Commerce issues tax credit certificates to approved applicants by February 15 of the following year. The certificate states the approved (possibly prorated) credit amount. Retain this certificate — it must be attached to your Maryland income tax return.
~4 hrs
-
5
Claim credit on Maryland income tax return
Attach the tax credit certificate to your Maryland income tax return and report the approved credit amount on the applicable schedule. For non-small businesses: apply against Maryland income tax liability; any excess carries forward 7 years. For small businesses: apply against Maryland income tax liability; if approved credit exceeds tax liability, up to 50% of the excess may be claimed as a refund on the return.
~4 hrs
Industry & certifications
NAICS codes: 541511, 541512, 541714, 541715, 325412, 336411, 334
Maryland's $250K per-applicant cap and proration mean the real benefit is often 50-70% of your calculated credit. File early and accurately — Commerce can only certify what you apply for, and late applications are permanently barred.
Deadline & timing
Applications must be submitted to the Maryland Department of Commerce by November 15 of the year following the applicable tax year. Maryland Commerce reviews applications and issues tax credit certificates to approved applicants by February 15 of the year after the deadline (e.g., February 15, 2026 for tax year 2024 applications). The credit certificate is then attached to the Maryland income tax return. Late applications are not accepted — missing the November 15 deadline means forfeiting that year's credit. Applications are submitted via Maryland Commerce's online portal.
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Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.